Aristocrat feels pain in US

By Vanda Carson

30 April 2008 — 12:00am

THE poker machine maker Aristocrat Leisure yesterday warned it was expecting a fourth consecutive year of relatively flat profit growth, blaming the US economic decline for flagging orders of new machines in its biggest market.

At the company's annual meeting the chief executive, Paul Oneile, said: "The full-year trading result is expected to be broadly in line with that reported in 2007."

Last year the world's second-largest maker of poker machines posted a profit of $247 million, up from $239 million the previous year and $244 million in 2005.

Analysts had expected the company to post a profit as high as $293 million this year, with most tipping $272 million.

The company has avoided giving firm profit guidance due to difficulties in predicting when customers will order machines, and the unpredictabilty of the highly regulated industry.

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Mr Oneile said the US economic decline meant its customers were not replacing their old machines.

However, he expected they would be ready to invest in new equipment towards the end of the year.

He also said the opening of new US casinos towards the end of the year would trigger orders from new customers in a market which provides almost half its revenue.

Analysts had expected Aristocrat to sell up to 13,500 machines to the US market this calendar year. Its rival International Game Technology has also been hit by the slow-down.

Aristocrat's chairman, David Simpson, said it was likely this year would be "difficult" and told shareholders that the board was taking the situation in the US seriously. "We don't like where we are at," he said. "We are not satisfied with it. We will work as hard as we can … and that includes cost efficiencies."

Mr Oneile said he planned to reduce the impact of slowing sales by slashing costs. This would include job cuts and reviewing supplier terms.

"Every line of our operating expenses is being examined in minute detail to cut any fat out of the operation that has built up over the past years - so no sacred cows," he said.

He said the company expected to supply hundreds of machines to casinos run by native American tribes in California and Florida.

Sales of machines in Victoria were to be given a boost by the Victorian Government's decision to allow pubs and clubs to own poker machine licences from 2012, he said.

This would result in pubs and clubs "turning over machines much more rapidly than they have been in the past".

However, orders would slow over the next 12 months, and would not be buoyant in the next four years.